Group

4 Microeconomics
Project Product Proposal
G Force Services

Group Members:
Afzal Anwar
Ashutosh Atreya
Kapildeep Singh Chauhan
Parul Sareen
Ruchika Rai
Siddharth Patnaik

Contents

Product ......................................................................................................................................................... 3
Roles and Responsibilities of Team Members .......................................................................................... 4
Demand Determinants ................................................................................................................................. 4
Demand Function ..................................................................................................................................... 4
Why we selected this product .................................................................................................................. 5
What we expect from the product for the next 7 rounds ........................................................................ 5
Sales Data ................................................................................................................................................. 5
Demand Variation .................................................................................................................................... 6
Discussions with Prof. V.P Singh ................................................................................................................... 8
Demand Estimation based on demand function ...................................................................................... 9
Sale Details - Day 2 onwards .................................................................................................................. 12
Cost and Revenue Analysis: .................................................................................................................... 15
Demand Forecasting .............................................................................................................................. 25
Regression Analysis ................................................................................................................................ 29
Conclusion .............................................................................................................................................. 36
Acknowledgment ................................................................................................................................... 38

Based on the needs identified in Great Lakes environment, Group 4 has selected consumer food
products. The name of our business will be G Force Services.

Product:
The items identified under consumer food products are:

Chicken Hotdogs

Chicken Sticks

Veg Hotdogs/ Aalu Tikki Bites

Cheese Pops/ Chilli Cheese Bites / Cheese Shots

This is the initial list of products that we would be offering. Depending on the market conditions
and demand in the initial days of sale, we would expand the product profile to include products
similar in nature.

Roles and Responsibilities of Team Members:

Operations:
o

Ashutosh Atreya: Responsible for taking and handling orders

Afzal Anwar: Responsible for cooking

Parul Sareen: Responsible for cooking

Finance:
o

Marketing:
o

Kapildeep Singh Chauhan: Responsible for handling cost, income and inventory

Siddharth Patnaik: Responsible for building up customer base

Customer Service:
o

Ruchika Rai: Responsible for interacting with customers and seeking feedback

Demand Determinants:

First ones to offer non-vegetarian food on campus at a very reasonable rate

First ones to offer better quality snacks along with options to customize as per customers liking

Limited/no close substitutes available for chicken on campus

Limited options for fast food on and near the campus

Demand Function:
QDX = F(PX, N, I, PY, T,A)

N = Consumers in the market include ~6 staff members and 93 students
I = Consumers income has been considered and a nominal price of the product has been fixed
PY = Price of related commodities
T = Tastes of consumers
A = Advertising expense

QDX = a0 - 0.5PX + 0.1N + 0.05I + 0.1Py + 0.2T + 0.1A

a0 = Minimum estimated sale

N = Consumers in the market include ~6 staff members and 93 students
I = Consumers income has been considered and a nominal price of the product has been fixed
PY = Price of related commodities
T = Tastes of consumers
A = Advertising expense

Why we selected this product:

We have selected this product because there is lack of/limited options available for nonvegetarian food in and near the Great Lakes Institute of Management, Gurgaon. While there will
be many players in the market offering fast food, what we offer is not only the chance to eat nonvegetarian food (our USP) as a snack but also as a meal. Considering the market also contains a
considerable population of vegetarian people, we are offering vegetarian options such as veg
hotdogs/aalu tikki bites and cheese pops/cheese chilli bites. The food is prepared in front of the
customers as per their liking and choice. It is a combination of hygienic food and great taste.

What we expect from the product for the next 7 rounds:

We expect to start the sale of our product on June 07, 2016. We will start off at a price where
our margins would not be too high. In the initial 2-3 days we will determine the demand of our
product and will change the price of our product and stock supplies accordingly. We expect to
have good sales during the first 7 rounds as we will be offering a product for the first time and
we will be getting the first mover advantage.

Sales Data:

Sales Day

Item

Price per
unit

Expected

Actual

Expected

Sales

Sales

Revenue

(Qty)

(Qty)

Revenue
Realized

Day 1

Chicken Hotdog

75

10

17

750

1275

Chicken on Stick

75

225

225

Cheese Pops

40

7 + 11

200

3001

18

27

1175

1800

TOTAL

Day 2

Chicken Hotdog

75

12

Aloo Tikki Bites

50

Chicken on Stick

50

Chilli Cheese

50

10

32

Bites
TOTAL

Demand Variation:
Day 1: Considering it was the first day in the market, with no close substitutes, both the introductory
price and customer taste helped to determine the demand of our product. After sales, we rolled out a
feedback form to get viewpoints and suggestions from our customers on the product sold.

Day 2:
1

Sold one plate of Cheese Pops for Rs. 20 as the size of the product was smaller than the usual serving.

More players would enter the market and to understand where our business stands we would
not reduce the price of our products. However, customers could not differentiate between
Chicken Hotdog and Chicken on Stick, hence, we would reduce the price of Chicken on Stick
from Rs. 75 to Rs. 50.

Based on the feedback received and in order to tap vegetarian customers, we would introduce
vegetarian variants on the menu along with our existing Cheese Pops.

We would include additional sauces to improve the taste of our product, which is also our
products strength. This would help us retain our customers and attract new ones.

Discussions with Prof. V.P Singh

Discussion Round 1: In our first round of discussion with Professor V.P. Singh, we revised our idea from
providing delivery services to selling consumer food products. Consumer Food Products will be our main
product to start with. Going forward, depending on the business conditions, we would include variety in
the products and services offered.

Demand Estimation based on demand function

Chicken hotdog
Estimated
Price

Quantity

85

3.45

80

4.45

75

5.45

70

6.45

65

7.45

60

8.45

Assumption: All factors except price remain the same and minimum sale is 20.

Chicken Hotdog Estimated Sales

100

Price

80
60
40
20
0
0

10

Quantity

Hotdog on Stick
Estimated
Price

Quantity

85

3.45

80

4.45

75

5.45

70

6.45

65

7.45

60

8.45

Assumption: All factors except price remain the same and minimum sale is 20.

Price

Hotdog on Stick Estimated Sales

90
80
70
60
50
40
30
20
10
0
0

10

Quantity

Cheese Shots
Estimated
Price

Quantity

55

4.45

50

5.45

45

6.45

40

7.45

35

8.45

30

9.45

Assumption: All factors except price remain the same and minimum sale is 15.

Cheese Shots Estimated Sales

60

Price

50
40
30
20
10
0
0

10

Quantity

Aloo Tikki
Estimated
Price

Quantity

65

7.45

60

8.45

55

9.45

50

10.45

45

11.45

40

12.45

Assumption: All factors except price remain the same and minimum sale is 20.

Aloo Tikki Estimated Sales

70
60

Price

50
40
30
20
10
0
0

10

12

14

Quantity

Sale Details - Day 2 onwards

Following is the sales projection data for all products basis the feedback received:

Sales Projection

#
Time

Chicken Price
Hotdogs

of X

(X)

Cheese
Shots
Plate

#
Price
of Y

(Y)

Hotdog
on
Stick

Price
of Z

# Veg
Hotdogs/Aloo
tikki (W)

Price
of W

(Z)

Day 1

10

75

40

75

50

Day 2

12

75

50

50

10

50

Day 3

10

75

10

50

50

10

50

Day 4

12

70

12

45

50

15

40

Day 5

70

40

50

20

40

Grand Total

52

40

19

60

Assumption: These sale figures are not basis the demand equation. Estimates basis demand
equation are given on page 7.

DAY 2: Considering the better than estimated sales on Day 1 and the feedback received, we
kept the price for Hotdog stable at Rs 75 on Day 2 even though we had estimated that we
would need to reduce the price to Rs 70. We had expected to sell 12 chicken hotdogs but were
able to sell 13, which was more than our estimate. Going by the feedback, we reduced the price
of Hotdog on stick from Rs 75 to Rs 50. This was done to boost sales and the final sale of 8 beat
our estimate of 3 and the desired result was duly achieved. The price elasticity of Hotdog on
stick is 1.25 which meant that the demand for hotdog on stick was relatively elastic. We
increased the price for Cheese shots from INR 40 to INR 50 as our marginal cost was very high
as compared to our marginal revenue. In spite of increasing the price, we were able to sell 9
units which was more than our estimate of 7. This showed that the price elasticity of Cheese

shots was 0.89 which meant the demand was relatively inelastic. We introduced aloo tikki
instead of veg hotdogs as the raw materials for the same were not available. We had estimated
that we would be able to sell 10 aloo tikki at Rs 50. Our final sales of 12 were more than our
estimate of 10.

DAY 3: Considering the response from Day 2 we kept the rate of hotdog same as 75 on Day 3.
But on day 3 we were not in a monopolistic market as other venders like Smaosa and bhel puri
had also started selling. We managed to sell only 7 chicken hotdogs instead of our estimate of
10. In hotdog stick we expected to sell 5 units but we only managed to sell 2 units. Based on the
feedback received, we decided to reduce the price of Aloo tikki by Rs 10 and were expecting to
sell 10 Aloo tikki. However, we were able to sell 13 units of the same highlighting that the
addition of other players in the market did not have much impact on the demand for Aloo tikki.
Sale of Cheese shots was as per our estimate of 10 units.

Day 4: As there was a lot of competition in the market, we decided to decrease the price for
chicken hotdog by Rs 5. However, we could only manage to sell 8 units of chicken hotdog
instead of our estimate of 12. Since we had reduced the price for chicken hotdog, we were
expecting to sell more than we had managed on the previous day but owing to factors like
delay in preparation and a highly competitive market, we couldnt sell as per our estimates.
Even an offer of Buy 2@130 (effectively reducing the price by another Rs 5) could not increase
the demand further. We can infer from this that:
-

decrease in price led to an increase in sales by 1 unit as compared to the previous day

increase in substitute goods, negated the impact of a decrease in price to a large extent

We were expecting to sell at least 3 units of hotdog on stick but there was no demand for the
same and we couldnt sell a single unit. Due to high competition, demand for Cheese shots
decreased to 6 units instead of the previous days figure of 12 units clearly highlighting a huge
cross price elasticity. Increase in substitute goods did not have any impact on the demand for
aloo tikki as we were able to sell 22 units of the same as against our estimate of 15 units.

Day 5: On the last day of the sale, we changed the time of sale from evening to midnight and
saw increase in demand for chicken hotdog. We were able to sell 13 units instead of our
estimate of 8 units without any change in price. However, many people used the offer of 2@Rs
130 and the effective price was approximately Rs 65 per unit. We had estimated that we would
be able to sell 3 units of hotdog in stick but could sell only 2 units. We reduced the price of
cheese shots by Rs 5 to Rs 40 and the sale of 6 units was as per our estimates. Demand for aloo
tikki had been pretty high throughout and hence, we increased out estimate to 20 units. But
the actual sale for aloo tikki again beat our estimate as we were able to sell 23 units. One of the
major factors for a good sale will be the change in time of sale as we this effectively meant that
at the time of sale we were operating a monopolistic market.

Actual

Sales
#
Time

# Cheese

Chicken Price

Shots

Price

Hotdogs of X Plate/Nuggets of Y
(X)

(Y)

Hotdog
on
Stick

Price
of Z

# Veg
Hotdogs/Aloo
tikki (W)

Price
of W

(Z)

Day1

17

75

40

75

50

Day2

13

75

50

50

12

50

Day3

75

10

50

50

13

40

Day4

70

45

50

22

40

Day5

13

70

40

45

23

40

Grand

58

39

15

70

-1

-4

10

Total
Actual -
Estimate






Cost and Revenue Analysis:
Chicken Hotdog

Units Sold Price

Total

Total

Average

Total

Fixed

Variable

Total

Marginal Average Variable Average

Revenue

Cost

Cost

Cost

Cost

75

75.00

669.79

697.00 1,366.79

75

150.00

669.79

0.00 1,366.79

75

225.00

669.79

75

300.00

75

Cost

Cost

Marginal

Revenue revenue

1,366.79

697.00

75.00

0.00

683.40

0.00

75.00

75.00

0.00 1,366.79

0.00

455.60

0.00

75.00

75.00

669.79

0.00 1,366.79

0.00

341.70

0.00

75.00

75.00

375.00

669.79

0.00 1,366.79

0.00

273.36

0.00

75.00

75.00

75

450.00

669.79

0.00 1,366.79

0.00

227.80

0.00

75.00

75.00

75

525.00

669.79

0.00 1,366.79

0.00

195.26

0.00

75.00

75.00

75

600.00

669.79

0.00 1,366.79

0.00

170.85

0.00

75.00

75.00

75

675.00

669.79

0.00 1,366.79

0.00

151.87

0.00

75.00

75.00

10

75

750.00

669.79

0.00 1,366.79

0.00

136.68

0.00

75.00

75.00

11

75

825.00

669.79

0.00 1,366.79

0.00

124.25

0.00

75.00

75.00

12

75

900.00

669.79

0.00 1,366.79

0.00

113.90

0.00

75.00

75.00

13

75

975.00

669.79

0.00 1,366.79

0.00

105.14

0.00

75.00

75.00

14

75

1,050.00

669.79

0.00 1,366.79

0.00

97.63

0.00

75.00

75.00

15

75

1,125.00

669.79

0.00 1,366.79

0.00

91.12

0.00

75.00

75.00

16

75

1,200.00

669.79

0.00 1,366.79

0.00

85.42

0.00

75.00

75.00

17

75

1,275.00

669.79

0.00 1,366.79

0.00

80.40

0.00

75.00

75.00

18

75

1,350.00

669.79

0.00 1,366.79

0.00

75.93

0.00

75.00

75.00

19

75

1,425.00

669.79

0.00 1,366.79

0.00

71.94

0.00

75.00

75.00

20

75

1,500.00

669.79

0.00 1,366.79

0.00

68.34

0.00

75.00

75.00

21

75

1,575.00

669.79

240.00 1,606.79

240.00

76.51

11.43

75.00

75.00

22

75

1,650.00

669.79

0.00 1,606.79

0.00

73.04

0.00

75.00

75.00

23

75

1,725.00

669.79

520.00 2,126.79

520.00

92.47

22.61

75.00

75.00

24

75

1,800.00

669.79

0.00 2,126.79

0.00

88.62

0.00

75.00

75.00

25

75

1,875.00

669.79

0.00 2,126.79

0.00

85.07

0.00

75.00

75.00

26

75

1,950.00

669.79

0.00 2,126.79

0.00

81.80

0.00

75.00

75.00

27

75

2,025.00

669.79

0.00 2,126.79

0.00

78.77

0.00

75.00

75.00

28

75

2,100.00

669.79

0.00 2,126.79

0.00

75.96

0.00

75.00

75.00

29

75

2,175.00

669.79

0.00 2,126.79

0.00

73.34

0.00

75.00

75.00

30

75

2,250.00

669.79

0.00 2,126.79

0.00

70.89

0.00

75.00

75.00

31

75

2,325.00

669.79

0.00 2,126.79

0.00

68.61

0.00

75.00

75.00

32

75

2,400.00

669.79

0.00 2,126.79

0.00

66.46

0.00

75.00

75.00

33

75

2,475.00

669.79

0.00 2,126.79

0.00

64.45

0.00

75.00

75.00

34

75

2,550.00

669.79

0.00 2,126.79

0.00

62.55

0.00

75.00

75.00

35

75

2,625.00

669.79

0.00 2,126.79

0.00

60.77

0.00

75.00

75.00

36

75

2,700.00

669.79

0.00 2,126.79

0.00

59.08

0.00

75.00

75.00

37

75

2,775.00

669.79

0.00 2,126.79

0.00

57.48

0.00

75.00

75.00

38

70

2,845.00

669.79

0.00 2,126.79

0.00

55.97

0.00

74.87

70.00

39

70

2,915.00

669.79

0.00 2,126.79

0.00

54.53

0.00

74.74

70.00

40

70

2,985.00

669.79

0.00 2,126.79

0.00

53.17

0.00

74.63

70.00

41

70

3,055.00

669.79

0.00 2,126.79

0.00

51.87

0.00

74.51

70.00

42

70

3,125.00

669.79

0.00 2,126.79

0.00

50.64

0.00

74.40

70.00

43

70

3,195.00

669.79

438.00 2,564.79

438.00

59.65

10.19

74.30

70.00

44

70

3,265.00

669.79

0.00 2,564.79

0.00

58.29

0.00

74.20

70.00

45

70

3,335.00

669.79

0.00 2,564.79

0.00

57.00

0.00

74.11

70.00

46

65

3,400.00

669.79

0.00 2,564.79

0.00

55.76

0.00

73.91

65.00

47

65

3,465.00

669.79

0.00 2,564.79

0.00

54.57

0.00

73.72

65.00

48

65

3,530.00

669.79

0.00 2,564.79

0.00

53.43

0.00

73.54

65.00

49

65

3,595.00

669.79

0.00 2,564.79

0.00

52.34

0.00

73.37

65.00

50

65

3,660.00

669.79

0.00 2,564.79

0.00

51.30

0.00

73.20

65.00

51

65

3,725.00

669.79

0.00 2,564.79

0.00

50.29

0.00

73.04

65.00

52

65

3,790.00

669.79

0.00 2,564.79

0.00

49.32

0.00

72.88

65.00

53

65

3,855.00

669.79

0.00 2,564.79

0.00

48.39

0.00

72.74

65.00

54

65

3,920.00

669.79

0.00 2,564.79

0.00

47.50

0.00

72.59

65.00

55

65

3,985.00

669.79

0.00 2,564.79

0.00

46.63

0.00

72.45

65.00

56

65

4,050.00

669.79

0.00 2,564.79

0.00

45.80

0.00

72.32

65.00

57

65

4,115.00

669.79

0.00 2,564.79

0.00

45.00

0.00

72.19

65.00

58

65

4,180.00

669.79

0.00 2,564.79

0.00

44.22

0.00

72.07

65.00

1600

MC, AC, AVC and MR curve - Chicken Hotdog

1400
1200
1000

Marginal Cost
Average Cost

800

Average Variable Cost

Marginal revenue

600
400
200
0

1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59

Assumption: All the cost data includes opportunity cost as well.

4,500.00

Break-even Analysis

4,000.00
3,500.00

Break-even point

3,000.00
2,500.00

Total Revenue

2,000.00

Total Cost

1,500.00
1,000.00
500.00
0.00
1 3 5 7 9 11131517192123252729313335373941434547495153555759

Hotdog on stick:

Averag
Total
Units

Pri

Total

Total

Variabl

Sold

ce

Revenue

Fixed Cost

e Cost

e
Total Cost

75

75.00

729.79

138.00

75

150.00

729.79

0.00

867.79

75

225.00

729.79

0.00

50

275.00

729.79

50

325.00

50

Marginal

Average

Variabl

Average

Marginal

Cost

Cost

e Cost

Revenue

revenue

867.79

867.79

138.00

75.00

0.00

433.90

0.00

75.00

75.00

867.79

0.00

289.26

0.00

75.00

75.00

260.00

1,127.79

260.00

281.95

65.00

68.75

50.00

729.79

0.00

1,127.79

0.00

225.56

0.00

65.00

50.00

375.00

729.79

0.00

1,127.79

0.00

187.97

0.00

62.50

50.00

50

425.00

729.79

0.00

1,127.79

0.00

161.11

0.00

60.71

50.00

50

475.00

729.79

0.00

1,127.79

0.00

140.97

0.00

59.38

50.00

50

525.00

729.79

0.00

1,127.79

0.00

125.31

0.00

58.33

50.00

10

50

575.00

729.79

0.00

1,127.79

0.00

112.78

0.00

57.50

50.00

11

50

625.00

729.79

0.00

1,127.79

0.00

102.53

0.00

56.82

50.00

12

50

675.00

729.79

0.00

1,127.79

0.00

93.98

0.00

56.25

50.00

13

50

725.00

729.79

0.00

1,127.79

0.00

86.75

0.00

55.77

50.00

14

45

770.00

729.79

54.00

1,181.79

54.00

84.41

3.86

55.00

45.00

15

45

815.00

729.79

0.00

1,181.79

0.00

78.79

0.00

54.33

45.00

1000

MC, AC, AVC and MR curve - Hotdog on stick

900
800
700
600

Marginal Cost

500

Average Cost
Average Variable Cost

400

Marginal revenue

300
200
100
0
1

10

11

12

13

14

15

16

Assumption: All the cost data includes opportunity cost as well.

1,400.00

Break-even Analysis

1,200.00
1,000.00

Loss

800.00

Total Revenue

600.00

Total Cost

400.00
200.00
0.00
1

10 11 12 13 14 15 16

Cheese shots
Margi
Total

Total

Margi
nal

Average

Variable

Average

reven

Cost

Cost

Cost

Revenue

ue

Units

Pri

Total

Fixed

Variable

Sold

ce

Revenue

Cost

Cost

Total Cost

40

40.00

0.00

360.00

1,007.29

40

80.00

0.00

0.00

1,007.29

40

120.00

0.00

0.00

40

160.00

0.00

40

200.00

40

Average

nal

1,007.29

360.00

0.00

503.65

0.00

40.00

40.00

1,007.29

0.00

335.76

0.00

40.00

40.00

0.00

1,007.29

0.00

251.82

0.00

40.00

40.00

0.00

0.00

1,007.29

0.00

201.46

0.00

40.00

40.00

240.00

0.00

0.00

1,007.29

0.00

167.88

0.00

40.00

40.00

40

280.00

0.00

0.00

1,007.29

0.00

143.90

0.00

40.00

40.00

50

330.00

0.00

0.00

1,007.29

0.00

125.91

0.00

41.25

50.00

50

380.00

0.00

0.00

1,007.29

0.00

111.92

0.00

42.22

50.00

10

50

430.00

0.00

0.00

1,007.29

0.00

100.73

0.00

43.00

50.00

11

50

480.00

0.00

0.00

1,007.29

0.00

91.57

0.00

43.64

50.00

12

50

530.00

0.00

0.00

1,007.29

0.00

83.94

0.00

44.17

50.00

13

50

580.00

0.00

0.00

1,007.29

0.00

77.48

0.00

44.62

50.00

14

50

630.00

0.00

0.00

1,007.29

0.00

71.95

0.00

45.00

50.00

15

50

680.00

0.00

0.00

1,007.29

0.00

67.15

0.00

45.33

50.00

16

50

730.00

0.00

0.00

1,007.29

0.00

62.96

0.00

45.63

50.00

1,140.0

40.00

1,140.

17

50

780.00

0.00

2,147.29

00

126.31

67.06

45.88

50.00

18

50

830.00

0.00

0.00

2,147.29

0.00

119.29

0.00

46.11

50.00

19

50

880.00

0.00

0.00

2,147.29

0.00

113.02

0.00

46.32

50.00

20

50

930.00

0.00

0.00

2,147.29

0.00

107.36

0.00

46.50

50.00

21

50

980.00

0.00

0.00

2,147.29

0.00

102.25

0.00

46.67

50.00

22

50

1,030.00

0.00

0.00

2,147.29

0.00

97.60

0.00

46.82

50.00

23

50

1,080.00

0.00

0.00

2,147.29

0.00

93.36

0.00

46.96

50.00

24

50

1,130.00

0.00

0.00

2,147.29

0.00

89.47

0.00

47.08

50.00

25

50

1,180.00

0.00

0.00

2,147.29

0.00

85.89

0.00

47.20

50.00

26

50

1,230.00

0.00

0.00

2,147.29

0.00

82.59

0.00

47.31

50.00

27

45

1,275.00

0.00

0.00

2,147.29

0.00

79.53

0.00

47.22

45.00

28

45

1,320.00

0.00

0.00

2,147.29

0.00

76.69

0.00

47.14

45.00

29

45

1,365.00

0.00

0.00

2,147.29

0.00

74.04

0.00

47.07

45.00

30

45

1,410.00

0.00

0.00

2,147.29

0.00

71.58

0.00

47.00

45.00

31

45

1,455.00

0.00

0.00

2,147.29

0.00

69.27

0.00

46.94

45.00

32

45

1,500.00

0.00

0.00

2,147.29

0.00

67.10

0.00

46.88

45.00

33

45

1,545.00

0.00

0.00

2,147.29

0.00

65.07

0.00

46.82

45.00

760.0
34

40

1,585.00

0.00

760.00

2,907.29

85.51

22.35

46.62

40.00

35

40

1,625.00

0.00

0.00

2,907.29

0.00

83.07

0.00

46.43

40.00

36

40

1,665.00

0.00

0.00

2,907.29

0.00

80.76

0.00

46.25

40.00

37

40

1,705.00

0.00

0.00

2,907.29

0.00

78.58

0.00

46.08

40.00

38

40

1,745.00

0.00

0.00

2,907.29

0.00

76.51

0.00

45.92

40.00

39

40

1,785.00

0.00

0.00

2,907.29

0.00

74.55

0.00

45.77

40.00

1200
1000

MC, AC, AVC and MR curve Cheese shots

800

Marginal Cost

600

Average Cost
Average Variable Cost

400

Marginal revenue

200
0
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43

Assumption: All the cost data includes opportunity cost as well.

Break-even Analysis
3,500.00
3,000.00
2,500.00

Loss

2,000.00
1,500.00
1,000.00
500.00
0.00

1 2 3 4 5 6 7 8 9 10111213141516171819202122232425262728293031323334353637383940414243
Total Revenue

Total Cost

Aloo tikki
Units

Pri

Total

Total Fixed

Total

Total

Margin

Average

Average

Marginal

Sold

ce

Revenue

Cost

Variable Cost

Cost

al Cost

Cost

Revenue

revenue

50

50.00

699.79

510.00

1,209.79

1,209.79

50.00

50

100.00

699.79

0.00

1,209.79

0.00

604.90

50.00

50.00

50

150.00

699.79

0.00

1,209.79

0.00

403.26

50.00

50.00

50

200.00

699.79

0.00

1,209.79

0.00

302.45

50.00

50.00

50

250.00

699.79

0.00

1,209.79

0.00

241.96

50.00

50.00

50

300.00

699.79

0.00

1,209.79

0.00

201.63

50.00

50.00

50

350.00

699.79

0.00

1,209.79

0.00

172.83

50.00

50.00

50

400.00

699.79

0.00

1,209.79

0.00

151.22

50.00

50.00

50

450.00

699.79

0.00

1,209.79

0.00

134.42

50.00

50.00

10

50

500.00

699.79

0.00

1,209.79

0.00

120.98

50.00

50.00

11

50

550.00

699.79

0.00

1,209.79

0.00

109.98

50.00

50.00

12

50

600.00

699.79

0.00

1,209.79

0.00

100.82

50.00

50.00

13

40

640.00

699.79

0.00

1,209.79

0.00

93.06

49.23

40.00

14

40

680.00

699.79

0.00

1,209.79

0.00

86.41

48.57

40.00

15

40

720.00

699.79

0.00

1,209.79

0.00

80.65

48.00

40.00

16

40

760.00

699.79

0.00

1,209.79

0.00

75.61

47.50

40.00

17

40

800.00

699.79

0.00

1,209.79

0.00

71.16

47.06

40.00

18

40

840.00

699.79

0.00

1,209.79

0.00

67.21

46.67

40.00

19

40

880.00

699.79

0.00

1,209.79

0.00

63.67

46.32

40.00

20

40

920.00

699.79

0.00

1,209.79

0.00

60.49

46.00

40.00

21

40

960.00

699.79

0.00

1,209.79

0.00

57.61

45.71

40.00

22

40

1,000.00

699.79

0.00

1,209.79

0.00

54.99

45.45

40.00

23

40

1,040.00

699.79

0.00

1,209.79

0.00

52.60

45.22

40.00

24

40

1,080.00

699.79

0.00

1,209.79

0.00

50.41

45.00

40.00

25

40

1,120.00

699.79

0.00

1,209.79

0.00

48.39

44.80

40.00

26

40

1,160.00

699.79

150.00

1,359.79

150.00

52.30

44.62

40.00

27

40

1,200.00

699.79

0.00

1,359.79

0.00

50.36

44.44

40.00

28

40

1,240.00

699.79

0.00

1,359.79

0.00

48.56

44.29

40.00

29

40

1,280.00

699.79

0.00

1,359.79

0.00

46.89

44.14

40.00

30

40

1,320.00

699.79

0.00

1,359.79

0.00

45.33

44.00

40.00

31

40

1,360.00

699.79

0.00

1,359.79

0.00

43.86

43.87

40.00

32

40

1,400.00

699.79

0.00

1,359.79

0.00

42.49

43.75

40.00

33

40

1,440.00

699.79

0.00

1,359.79

0.00

41.21

43.64

40.00

34

40

1,480.00

699.79

0.00

1,359.79

0.00

39.99

43.53

40.00

35

40

1,520.00

699.79

0.00

1,359.79

0.00

38.85

43.43

40.00

36

40

1,560.00

699.79

0.00

1,359.79

0.00

37.77

43.33

40.00

37

40

1,600.00

699.79

0.00

1,359.79

0.00

36.75

43.24

40.00

38

40

1,640.00

699.79

0.00

1,359.79

0.00

35.78

43.16

40.00

39

40

1,680.00

699.79

0.00

1,359.79

0.00

34.87

43.08

40.00

40

40

1,720.00

699.79

0.00

1,359.79

0.00

33.99

43.00

40.00

41

40

1,760.00

699.79

0.00

1,359.79

0.00

33.17

42.93

40.00

42

40

1,800.00

699.79

0.00

1,359.79

0.00

32.38

42.86

40.00

43

40

1,840.00

699.79

0.00

1,359.79

0.00

31.62

42.79

40.00

44

40

1,880.00

699.79

0.00

1,359.79

0.00

30.90

42.73

40.00

45

40

1,920.00

699.79

0.00

1,359.79

0.00

30.22

42.67

40.00

46

40

1,960.00

699.79

0.00

1,359.79

0.00

29.56

42.61

40.00

47

40

2,000.00

699.79

0.00

1,359.79

0.00

28.93

42.55

40.00

48

40

2,040.00

699.79

0.00

1,359.79

0.00

28.33

42.50

40.00

49

40

2,080.00

699.79

0.00

1,359.79

0.00

27.75

42.45

40.00

50

40

2,120.00

699.79

0.00

1,359.79

0.00

27.20

42.40

40.00

51

40

2,160.00

699.79

0.00

1,359.79

0.00

26.66

42.35

40.00

52

40

2,200.00

699.79

0.00

1,359.79

0.00

26.15

42.31

40.00

53

40

2,240.00

699.79

0.00

1,359.79

0.00

25.66

42.26

40.00

54

40

2,280.00

699.79

0.00

1,359.79

0.00

25.18

42.22

40.00

55

40

2,320.00

699.79

0.00

1,359.79

0.00

24.72

42.18

40.00

56

40

2,360.00

699.79

0.00

1,359.79

0.00

24.28

42.14

40.00

57

40

2,400.00

699.79

0.00

1,359.79

0.00

23.86

42.11

40.00

58

40

2,440.00

699.79

0.00

1,359.79

0.00

23.44

42.07

40.00

59

40

2,480.00

699.79

0.00

1,359.79

0.00

23.05

42.03

40.00

60

40

2,520.00

699.79

0.00

1,359.79

0.00

22.66

42.00

40.00

61

40

2,560.00

699.79

0.00

1,359.79

0.00

22.29

41.97

40.00

62

40

2,600.00

699.79

0.00

1,359.79

0.00

21.93

41.94

40.00

63

40

2,640.00

699.79

0.00

1,359.79

0.00

21.58

41.90

40.00

64

40

2,680.00

699.79

0.00

1,359.79

0.00

21.25

41.88

40.00

65

40

2,720.00

699.79

0.00

1,359.79

0.00

20.92

41.85

40.00

66

40

2,760.00

699.79

0.00

1,359.79

0.00

20.60

41.82

40.00

67

40

2,800.00

699.79

0.00

1,359.79

0.00

20.30

41.79

40.00

68

40

2,840.00

699.79

0.00

1,359.79

0.00

20.00

41.76

40.00

69

40

2,880.00

699.79

0.00

1,359.79

0.00

19.71

41.74

40.00

70

40

2,920.00

699.79

0.00

1,359.79

0.00

19.43

41.71

40.00

1400
1200

MC, AC, AVC and MR curve - Aloo

1000
Marginal Cost
800

Average Cost

600

Average Variable Cost

400

Marginal revenue

200
0
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70

Assumption: All the cost data includes opportunity cost as well.

3,500.00

Break-even Analysis

3,000.00
2,500.00

Break-even point

2,000.00

Total Revenue

1,500.00

Total Cost

1,000.00
500.00
0.00
1 4 7 10 13 16 19 22 25 28 31 34 37 40 43 46 49 52 55 58 61 64 67 70

Demand Forecasting


Moving and Weighted Average

For predicting the future demand efficiently, we have implemented the concepts of smoothening
techniques such as moving averages method and the exponential smoothening method, which
led to multiple results of demand forecast. However, we have found out the best method to
implement in our project by calculating the Root mean square error. Root mean square error is
defined as the measure of the differences between values predicted by a model or an estimator
and the values actually observed.

Chicken Hotdog:

The best model for Chicken Hotdog can be decided by looking at the RMS error each model is
producing; In the 3-Quarter moving averages method we got a RMSE of 3.277 and while
calculating the exponential smoothening method we forecasted the demand using sample
weighted averages as 0.3 & 0.5, in which we got the RMS errors as 4.128 & 4.779 respectively.

By looking at the RMS error we can conclude that both the weights in exponential method
produced a RMS error less than the RMSE of the moving averages method. So the moving average
method is to be preferred over exponential method for Chicken Hotdog.

Forecast based on 3-day moving average:
Days

Unit Sold

Average

Day 1

17

Day 2

13

Day 3

Day 4

12.33

Day 5

13

9.33

Forecast Day 6

9.33

9.33

Forecast Day 7

10.11

10.11

Forecast Day 8

10.81

10.81

Forecast Day 9

10.09

10.09

Forecast Day 10

10.34

10.34

Forecast Day 11

10.41

10.41

Forecast Day 12

10.28

10.28

Forecast Day 13

10.34

10.34

Chicken Hotdog Stick:

The best model for Chicken Hotdog Stick can be decided by looking at the RMS error each model
is producing; In the 3-Quarter moving averages method we got a RMSE of 2.617 and while
calculating the exponential smoothening method we forecasted the demand using sample
weighted averages as 0.3 & 0.5, in which we got the RMS errors as 2.116 & 2.466 respectively.

By looking at the RMS error we can conclude that both the weights in exponential method
produced a RMS error less than the RMSE of the moving averages method. So the exponential
method is to be preferred over moving averages method for Chicken Hotdog Stick.
Forecast based on 3-day moving average:
Days

Unit Sold Average

Day 1

3.00

Day 2

8.00

Day 3

2.00

Day 4

0.00

4.33

Day 5

2.00

3.33

Forecast Day 6

1.33

1.33

Forecast Day 7

1.11

1.11

Forecast Day 8

1.48

1.48

Forecast Day 9

1.31

1.31

Forecast Day 10

1.30

1.30

Forecast Day 11

1.36

1.36

Forecast Day 12

1.32

1.32

Forecast Day 13

1.33

1.33

Aloo Tikki:

The best model for Aloo Tikki can be decided by looking at the RMS error each model is producing;
In the 3-Quarter moving averages method we got a RMSE of 8.954 and while calculating the
exponential smoothening method we forecasted the demand using sample weighted averages
as 0.3 & .5, in which we got the RMS errors as 7.211 & 7.155 respectively.

By looking at the RMS error we can conclude that both the weights in exponential method
produced a RMS error less than the RMSE of the moving averages method. So the exponential
method is to be preferred over moving averages method for Aloo Tikki.

Forecast based on 3-day moving average:
Days

Unit Sold Average

Day 1

Day 2

12.00

Day 3

13.00

Day 4

22.00

8.33

Day 5

23.00

15.67

Forecast Day 6

19.33

19.33

Forecast Day 7

21.44

21.44

Forecast Day 8

21.26

21.26

Forecast Day 9

20.68

20.68

Forecast Day 10

21.13

21.13

Forecast Day 11

21.02

21.02

Forecast Day 12

20.94

20.94

Forecast Day 13

21.03

21.03

Cheese Shots:

The best model for Cheese Shots can be decided by looking at the RMS error each model is
producing; In the 3-Quarter moving averages method we got a RMSE of 1.815 and while
calculating the exponential smoothening method we forecasted the demand using sample
weighted averages as 0.3 & .5, in which we got the RMS errors as 1.166 & 3.392 respectively.

By looking at the RMS error we can conclude that both the weights in exponential method
produced a RMS error less than the RMSE of the moving averages method. So the exponential
method is to be preferred over moving averages method for Cheese Shots.

Forecast based on 3-day moving average:
Days

Unit Sold Average

Day 1

7.00

Day 2

9.00

Day 3

10.00

Day 4

7.00

8.67

Day 5

6.00

8.67

Forecast Day 6

7.67

7.67

Forecast Day 7

6.89

6.89

Forecast Day 8

6.85

6.85

Forecast Day 9

7.14

7.14

Forecast Day 10

6.96

6.96

Forecast Day 11

6.98

6.98

Forecast Day 12

7.03

7.03

Forecast Day 13

6.99

6.99

Regression Analysis

X = Days
Y = No. of Units Sold

Chicken Hotdog

Regression Analysis - Chicken Hotdog

18
16
14
12
Y

10
8

Predicted Y

Linear (Y)

Linear (Predicted Y)

2
0
0

4
X Variable 1

Projected sales based on regression equation:

X (Days)

Y (No. of Units)

14.2

12.9

11.6

10.3

7.7

6.4

5.1

3.8

10

2.5

11

1.2

12

-0.1

13

-1.4

y = -1.3x + 15.5
R = 0.25149

14

-2.7

15

-4

Hotdog on stick

Regression Analysis - Hotdog on

Stick
9
8
7

6
5

Predicted Y

Linear (Y)

Linear (Predicted Y)

1
0
0

X Variable 1

Projected sales based on regression equation:

X (Days)

Y (No. of Units)

-1

-2

y = -x + 6
R = 0.27778

-3

10

-4

11

-5

12

-6

13

-7

14

-8

15

-9

Cheese Shots

Regression Analysis - Cheese Shots

12
10

8
Y

Predicted Y
Linear (Y)

Linear (Predicted Y)
2
0
0

4
X Variable 1

y = -0.4x + 9
R = 0.14815

Projected sales based on regression equation:

X (Days)

Y (No. of Units)

8.6

8.2

7.8

7.4

6.6

6.2

5.8

5.4

10

11

4.6

12

4.2

13

3.8

14

3.4

15

Aloo Tikki

Regression Analysis - Aloo Tikki

25
20
15
Y

Y
Predicted Y

10

Linear (Y)
Linear (Predicted Y)

5
0
0

X Variable 1

Projected sales based on regression equation:

X (Days)

Y (No. of Units)

11.2

15.4

19.6

23.8

28

32.2

36.4

40.6

44.8

10

49

11

53.2

12

57.4

13

61.6

14

65.8

y = 4.2x + 7
R = 0.87327

15

70

Cross Price Elasticity of Substitute product (Competitor product)

In economics, the cross-price elasticity of demand measures the responsiveness of the quantity
demanded for a good to a change in the price of another good. In our project we observed the
trend to be changing in the way mentioned below.
During first three days we were in monopolistic market, there were no other substitute product
in the market. Fourth and Fifth day substitute product(Samosa) has influenced the quantity
demanded for our product (aloo Tikki). As it can be clearly concluded from the data that the
price of samosa increased from 12.5 to 13 on the Fourth day and to 14 on the Fifth day, our
demand has risen from 12 units on Day2 to 22 on Day3; and further increase in the price of
samosa to Rs15 on day 5 has boosted our unit sale to 23. Hence it is clearly evident that the
price rise in the samosa has a positive effect on the quantity demand of our product aloo tikki.
Similarly, there is one substitute for Chicken hotdog which is omelet. Similar to aloo tikki, we
were monopolistic for first three days in Chicken Hotdog. On day 4 the price for omelet was 35
and we sold 8 hot dogs which was one more than day 3 sale. On day 5 they increased the price
of omelet by 5 Rs and that day we sold 13 hot dogs which was 5 more than the previous sale.
Hence, we observed that rise in rate of omelet increased the sale of our non-veg item Chicken
Hotdog.

Cross Price Elasticity of Substitute (Own Product)

On Day 1 we were not able to sell aloo tikki so there were no substitute for our product Chicken
Hotdog and we sold it at the price of 75, there were monopolistic market for chicken hotdog so

we sold 17 hotdogs on day 1. On day 2 we introduced Veg aloo tikki in our menu at the price of
50 Rs and kept the price for Chicken Hotdog same as 75. Sale of aloo tikki affected the sale of
hot dog and we sold 13 hotdogs on day 2 which was 5 less than the previous day. Same trend
was there for next three days also. Sale of Chicken Hotdog was 7 and 8 for day 3 and day 4
respectively affected by the sale of aloo tikki which was 13 and 22 for day 3 and day 4
respectively. On Day 5 Chicken hotdog attracted some customer as it was the last day and we
reduced price by 10 Rs. Last day we sold 13 chicken hot dog which was 5 more than the
previous sale. Hence we observed that decrease in rate increases the sale of Hotdog.

Conclusion

We sold 4 products namely, chicken hotdog, hotdog on stick, cheese shots and aloo tikki. The
core products for us were chicken hotdog and aloo tikki and hotdog on stick and cheese shots
were used as variants of the core products to attract customers and enhance sales. For the
initial 3 days, we were operating in a monopolistic market and were able to sustain the prices.
For the next 2 days we were operating in a highly competitive market and had to adjust our
prices to maintain our share in the market.

We had advertised our product on whatsapp and rest of the marketing was done through
personal selling.

It can be noticed from the cost curves that chicken hotdog reached the breakeven point at 22
units while aloo tikki reached the same point after 31 units. The total revenue curve for hotdog
on stick and cheese shots was always below total cost curve. Excel sheet where all the
calculation is done is attached at the end of the report.

It can be observed from the regression analysis that the sales for chicken hotdog, hotdog on
stick and cheese shots will keep decreasing and will eventually become zero. However, sale for

aloo tikki will increase to 70 units per day by day 15. We can conclude from this data that we
should stop selling chicken hotdog, hotdog on stick and cheese shots, however, we should keep
selling aloo tikki as it has the potential to yield higher revenue.

Basis all the analysis, we can state that we should continue to sell aloo tikki as the profit margin
for the same is around 50% and discontinue selling the other products.

MIE_Product_Sales
_Report (1)

Acknowledgment

Thanks to Dr. V. P. Singh for his continued support and mentorship during the project. He has
helped us in analyzing and understanding important concepts in Microeconomics.